Marketers Beware: FTC Narrows Scope of TSR’s EBR

Recent actions by the Federal Trade Commission significantly narrow the scope of the Telemarketing Sales Rule’s existing business relationship exemption and place greater obligations on callers who rely on the exemption to avoid scrubbing call lists against the federal DNC registry. Companies that call current, former and prospective customers need to understand these developments and consider how they may impact their call campaigns in order to avoid potential TSR violations.

Last November, the FTC released a final rule setting forth a number of amendments and clarifications to the Telemarketing Sales Rule (TSR). In large part, the revisions addressed and now prohibit certain payment methods that the FTC has found to be associated with illegitimate telemarketing businesses, such as drafting remote checks and urging consumers to use reloadable debit cards.

Calling Prospects
While banning questionable payment methods may impact only a small number of companies, of greater concern to all firms that engage in telemarketing are provisions of the rule that addresses the TSR’s Do Not Call regulations (DNC). The final rule places stringent requirements on companies that wish to avoid scrubbing call lists against the DNC registry by claiming an exemption either under an existing business relationship (EBR) with the called parties, or obtaining such parties’ express written agreement to receive calls (EWA).

First, the ruling clarifies that the person claiming the exemption bears the burden of proving the EBR or EWA. According to the FTC, this clarification is intended “to make it unmistakably clear that the burden of proof for establishing an EBR or EWA as an affirmative defense to otherwise prohibited calls to numbers on the registry ‘falls on the seller or telemarketer relying on it.’” While this point may appear obvious, the FTC felt it necessary to clarify this requirement given the multiple DNC cases it has brought where defendants claimed that the TSR did not require them to obtain and possess such authorizations. Marketers who rely on the exemption should therefore ensure that they have effective document retention policies and procedures in place to maintain these records in the event of a challenge.

Second, and more concerning, the ruling declares that an EBR or EWA belongs only to the “specific seller” who obtained it directly from the consumer. Read literally, this statement is, at a minimum, troublesome for, and at worst, lethal to, lead buyers (as well as publishers), as the FTC appears to limit these exemptions solely to companies that develop their own leads. Given the extremity of the statement, it might appear that the FTC is blind to how the lead generation industry operates. But make no mistake, the FTC meant what it said, adding “cold calls to consumers whose names and numbers appear on a calling list purchased from a third-party list broker are prohibited … because the calls are not placed by the specific seller that obtained the EBR or EWA.” Yes, those are exact words.

But don’t fold the tents and move out of Dodge just yet. Just one month after releasing its ruling, the FTC issued its biennial report to Congress on the DNC, which actually recognizes how the lead gen industry works and offers some guidance on how companies may rely on leads generated by others. The FTC warned that unless a campaign specifically identifies the advertisers who will use the lead, those advertisers may not rely on the EBR exemption to avoid scrubbing, because consumers will not know from whom to expect a call.

More specifically, the FTC cautioned “Unless the consumer inquired into the services of a specified seller, or the lead generator made disclosures that would alert the consumer that he or she should expect telemarketing calls from the seller as a result of his or her communications with the lead generator, the seller cannot claim that it has a relationship with the consumer such that it can ignore the consumer’s request not to receive telemarketing calls.”